Personally, I've worried about the "nuclear winter" hypothesis for stocks when boomers retire since long before I heard of it. My decision to stop dripping money into stocks (index fund) is based on fear, though I've modified my plans so I can keep some money in the stock market for when I plan to be dead.

But the reality is complicated. For one thing, how much of the money in the stock market comes from middle class boomers who have been dripping it in over many years is unclear: probably a significant amount, but not dominant compared to stock holdings of the very wealthy and institutions (not including pension funds). Much will depend on how others react. Then, of course, ultimately returns on stocks come from profits not P/E inflation/pyramid scheme. It may that P/E ratios will come way down, but if companies pay higher dividends over the long haul things may even out. I wouldn't be expecting double digit returns on stocks, but there may not be some permabear frost.

With bonds, I think it is quite different. Early in boomer retirements, there may well be a retreat from stocks to bonds, leading to lower yields, all else being equal. (All else, won't be equal—current yields are being heavily influenced by foreign capital and social security surplus.) But, eventually, boomers will simply be withdrawing money, which, all things being equal, would drive yields up.

As to social security: I think Kent is right in pointing to how insurance companies would benefit if people sought private annuties. But so far the brokerages haven't been all that excited about small time private accounts in stocks and bonds. They would probably be more excited if they thought they would get the high cost accounts many got with 401(k)s, instead of Vanguard-like index funds. But for now, part of the sales pitch is that people would get low cost funds (to counter arguments for why privatizing hasn't worked elsewhere).

For the most part, the attempt to privatize social security is ideologically driven. The laissez faire religious cult refuses to believe that public (or not-for profit) can ever work better than for-profit, despite overwhelming evidence and logic for why sometimes public and not-for-profit win. I do wonder if the attempt to push social security into stocks is also because the privileged ne'er-do-wells who live off their stocks realize they will need more money flowing into stocks when boomers start retiring to get the returns to which they have become accustomed.

Bush, himself, I'm more and more convinced, really doesn't get it. He's one of these people who firmly believes past returns predict the future (he is clueless about how circumstances change and require rethinking), and he is incapable of understanding why those who lack the ultimate safety net of an aristocratic family can't afford to take big risks with money and would prefer the guarantee of an insurance plan to the bigger return from greater risk if things go well. Optimism is a very easy philosophy is you can't lose no matter how much you gamble. "Freedom's just another word for nothing there to lose."